The EU - Japan Economic Partnership Agreement

The Economic Partnership Agreement, signed days after the US tariffs on Chinese goods came into effect and the threat by President Donald Trump to impose more, is the biggest ever negotiated by the EU. The Agreement creates an open market of over 600 million people and unites countries whose cumulative GDP is estimated to have accounted for about one third of global GDP in 2017. It will end around 99% of duties paid by EU exporters to Japan and 94% of duties on Japanese imports into the EU straightaway, rising to 99% over the next few years. It removes long-standing regulatory barriers, on products such as cars. Other sectors, such as agriculture, will also benefit with EU exporters gaining access to a market of 127 million potential consumers.  Alongside the abolition of tariffs, the Agreement seeks to protect geographical indications for food products, improve market access for services and assist small-medium sized businesses.

Based on our most up-to-date trade data and focusing on the containerised market, we have looked at the latest trends in the volume of cargo moved between the EU28 and Japan at a commodity level.

We estimate that Japan accounted for about 10% of the EU’s total containerised exports in 2017, whereas the EU represented about the same proportion of Japan’s containerised exports in the same year. However, while EU containerised exports to Japan have accounted for roughly the same share of the total between 2007 and 2017, Japanese containerised exports to the EU have declined over the last decade. The volume of containerised cargo moved from Japan to the EU declined during the 2008-09 recession and never returned to the pre-recession level.  In 2017 we estimate the volume of containerised cargo transported from Japan to the EU has declined by some 35% compared to 2007. The Economic Partnership Agreement is likely to restore that flow as Japan and the EU liberalise their trade relations.

Figure 1: EU-Japan trade (Estimated Loaded TEU), Index 2007=100

Source: MDS Transmodal, World Cargo Database 19.06.2018

The following tables show the principal members states of the EU that trade with Japan and the main commodity groups moved between the two markets.

Table 1: EU exports to Japan from the top 5 exporting countries, estimated loaded TEU

Source: MDS Transmodal, World Cargo Database 19.06.2018

 

Table 2: Japanese exports to the top 5 EU countries, estimated loaded TEU

Source: MDS Transmodal, World Cargo Database 19.06.2018 

The UK, as it prepares to leave the EU, features as one of the top 5 EU importing countries from Japan (with road vehicles, electrical machinery and rubber manufactures amongst the major commodity groups imported by the UK) and is the ninth most important EU exporting country to Japan (with cereals & cereal preparations, rubber manufactures and beverages amongst the major commodity groups exported to Japan from the UK). It appears unlikely that the Economic Partnership Agreement will simply be rolled over when the UK leaves the EU and so the UK will need to negotiate a separate free trade agreement with Japan once it has left the EU.